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Chapter XI Board and Board Provisions (Cos Act 2013)


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Chapter XI Board and Board Provisions (Cos Act 2013)

  1. 1. Room No.6, 4th Floor, Commerce House 2A, Ganesh Chandra Avenue, Kolkata 700013 Connect me @ : (033) 3028 8955-57; (033) 3002 5630-33; 98310 99551 Visit me @ : Companies Act, 2013 By CS Mamta Binani Past Chairperson (Year 2010), EIRC of ICSI Practising Company Secretary At the ÝOU’ Grooming Institute For Company Secretaries dated : 14.09.2013
  2. 2. Room No.6, 4th Floor, Commerce House 2A, Ganesh Chandra Avenue, Kolkata 700013 Connect me @ : (033) 3028 8955-57; (033) 3002 5630-33; 98310 99551 Visit me @ : UNDER THE COMPANIES ACT, 2013 (Chapters XI, XII, XIII) In this slide show – Chapter XI
  3. 3. Section 149 (old 252,253,259) • Minimum number of directors in case of private and public companies is 2 and 3 respectively • The limit of maximum number of directors is increased from 12 to 15 • In 1956 act, CG approval was required to go beyond 12 • In 2013 act, SR will be required to go beyond 15. No CG approval is required • OPC needs to have minimum 1 director • At least 1 director shall be a person - stayed in India for a total period of not less than 182 days in the previous calendar year
  4. 4. Women Director •Prescribed class of companies to have 1 women director •As per the draft rules: Listed and also for companies with paid up capital of Rs.100 crores and above
  5. 5. Independent Directors • Public companies to have 1/3 ID’s • Criteria: 1. Paid up capital >= Rs.100 crores Outstanding loans/borrowings/debentures/deposits > Rs.250 crores • Nominee Director/ Representative Director not to be considered as ID’s (in conflict with existing clause 49) • ID’s to abide by a detailed code of con (Schedule IV) • Issue of letter of appointment to ID mandatory • Letter to contain terms of appointment, Board’s expectations, fiduciary duties etc. • Will not retire by rotation/ Transition period: 1
  6. 6. Independent Directors •ID’s to hold 1 separate meeting in a year without other directors and management •Tenure restricted to 2 terms (5+5) •Second term to require SR •Then cooling period of 3 years •Tenure served by ID before commencement of new Act not to be counted •Stock options not permitted for ID (inconsistent with Listing Agreement) • Profit related commission and sitting fees allowed
  7. 7. Qualifications of ID • Appropriate balance of : (i) skills (ii) experience and (iii)knowledge in one or more fields of finance, law, management, sales, marketing, administration, research, corporate governance, technical operations or other disciplines related to the company’s business • After the appointment of ID, the B/R shall have to furnish a statement to the effect that in the opinion of the Board, the ID possesses the appropriate balance of skills, experience and knowledge
  8. 8. Database of ID’s-Section 150 • Anybody, Institute or Association • Which has been authorised in this behalf by the CG • Shall create and maintain a data bank of persons • Willing and eligible to be appointed as ID • Such data bank shall be placed on the website of MCA • Or any other website as may be approved or notified by the CG • Details as mentioned in Rules to be put up on the site • A disclaimer to be carried by the website • ID may also apply • Charges can be levied
  9. 9. Appointment of ID-OR • The appointment has to be approved by the Company • In a general meeting • Special Business • Ordinary Resolution • The explanatory statement (section 102 already enforced), shall inter-alia, mention the justification for choosing the appointee as the ID and also a statement that in the opinion of the Board, he fulfils the conditions specified in the Act
  10. 10. Section 151 (old 252)-Small Sh • Listed company may have one director elected by such small shareholders • There is a change vis-à-vis the Companies Act of 1956. • Now, only listed companies • Small shareholders has been explained in the section itself as ‘a shareholder holding shares of nominal value of not more than Rs.20,000 or such other sum as may be prescribed
  11. 11. Small shareholder’s director • Suo-motu - Listed Company or • Upon the notice of not less than 500 or 1/10th of the total number of small shareholders, whichever is lower • Such director will be considered as an ID • Shall not be liable to retire by rotation • Not for a period exceeding 3 consecutive years • On the expiry of the tenure, shall not be eligible for re-appointment • No person shall hold the office of small shareholders director in more than 2 companies at the same time
  12. 12. Section 152-Appointment of Dir • Every Director needs to furnish a declaration-Not disqualified for being appointed as Director • Valid DIN for getting appointed • Consent letter made mandatory for private limited companies also and needs to be filed with ROC even • OPC-Individual member will be deemed to be the first director unless specific appointment made • Retirement by rotation-provisions remain the same. To note that ID number not to be included in reckoning total number of directors
  13. 13. Sections 153, 154, 155, 156, 157, 158, 159-Provisions of DIN • 153: To apply for DIN if intending to get appointed • 154: CG to allot DIN to the applicant within one month • 155: Cannot have more than 1 DIN • 156: Existing Director to intimate DIN to all Companies within 1 month • 157: Company to inform DIN to ROC within 15 days (instead of a week) of the receipt of the same from the Director • 158: Obligation to mention DIN • 159: Punishment for contravention of sections 155, 156
  14. 14. Section 160 (old section 257) • Right of persons other than retiring directors to stand for directorship: • Amount of deposit increased from Rs.500 to Rs.1.00 lac or such higher sum as may be prescribed • Now, even if the person is not elected but the person so proposed gets more than 25% of total valid votes, the amount of deposit will be refunded • 25%- be it by show of hands or on poll • The manner in which the notice will be sent to the shareholders will be prescribed by the Central Government
  15. 15. Section 161 (old sections 260,262 & 313) • Additional Director: If someone’s resolution for appointment as a Director, gets defeated in a GM, then that person cannot be appointed as an additional director • Alternate Director : 1) BOD may appoint, if authorised by AOA otherwise the GM 2) The said appointee should not be holding alternate directorship for any other director in the Company 3) If he is an AD to any ID, then AD also needs to satisfy the criteria laid for ID It is to be clarified here that a Director of the Company may act in dual capacity, that is for himself and as an AD for any other Director of the Company
  16. 16. En block resolution-Section 162 A single resolution not allowed for appointing 2 or more persons as directors of the Company unless A proposal to move such a motion has first been agreed to at the meeting without any vote being cast against it. (This provision now made applicable to private co. also)
  17. 17. Section 163 (old section 265) • Principle of proportional representation 1. The AOA of the Company may provide for this 2. If it provides, then not less than 2/3 of the total number 3. By a single transferable vote or by a system of cumulative voting or otherwise 4. Such appointment may be made once in every 3 years 5. Casual vacancies to be filled in as in the case of additional director (It is to be noted that even a private limited company can provide for this provision in its AOA)
  18. 18. Section 164 (old section 274) • Disqualifications for appointment of Director Apart from the existing disqualifications, the additions are as below: 1. Conviction of an offence dealing with related party transactions at any time during the last preceding 5 yrs 2. A person who has been convicted of any offence and sentenced in respect thereof to imprisonment for a period extending to 7 years or more 3. A person who has not obtained a DIN (very important: old section 274(1)(g) mentioned of public company only but the new section 164(2) has removed the word public)
  19. 19. Section 165 • Maximum number of directorships is 20 (instead of 15 in old law), within which maximum 10 public limited companies • Including alternate directorships • Including directorship in private companies that are either holding or subsidiary company of a public company • If the members so want, they may by SR, specify a lesser number of directorships for their directors (It is to be noted that a transition period of 1 year will be provided to the directors to comply with the maximum number of directorships) Very Important: 1. The Directors have to intimate their choice to each of the company where they wish to continue 2. Intimation to be given to the ROC also
  20. 20. Sec 166-Duties of Directors-Carved •In line with the UK Companies Act, 2006 •In accordance with the Company’s AoA • To act in good faith, to promote objects of the company for benefit of members and the best interest of the company, employees, community and environment •To exercise duties with due & reasonable care, skill and diligence •Not to achieve any undue gain/advantage
  21. 21. Sec 167-Vacation of office of Director Inter-aia, If he absents himself from all the meetings of the BOD held during a period of 12 months with or without seeking LOA of the Board (Section 167(b)) Fine is hefty if he continues even after he should have vacated his office Resignation of Director (Section 168) Director also needs to forward to ROC, a copy of his resignation along with detailed reasons within 30 days of resignation in the prescribed manner Quick fix solution Where all directors have resigned, the promoter or in his absence, the CG shall appoint required number of directors. These directors to hold office till the directors are appointed in General Meeting
  22. 22. Section 169 (old section 284) Removal of Director •The provisions remains the same •The words CG have been replaced by Tribunal •In case of contravention of the provisions of this section, the penalty has been increased
  23. 23. Section 170 (old sections 303,307) The register shall contain: - Particulars of its Directors - KMP Details like: - Securities held by each of them in the Company or its holding, subsidiary, subsidiary of company’s holding company or associate companies - Other details as may be prescribed (It is to be noted two separate registers-that of directors and directors shareholding has been done away with) Very important: Return for appointment or any change therein shall also be filed for appointment of KMP
  24. 24. Section 171 (old section 304) • In the old section 304, the provision of inspection was only there. No provision for extracts • In the new law, provision for extracts included • In old law, any member (without charge) and any other person (Re. 1.00 for every inspection) • In the new law, to members…. • and to any person attending the annual general meeting (the provision u/s 171(1)(b) is to keep the register open for inspection at every annual general meeting of the company and that it shall be made accessible to any person attending the meeting)
  25. 25. Section 172 (new) •Punishment provisions If a company contravenes any of the provisions of Chapter XI and for which no specific punishment is provided in the said provisions of the Chapter, the company and every officer of the company who is in default shall be punishable with fine which shall not be less than Rs.50,000 but which may extend to Rs.5.00 lacs
  26. 26. Room No.6, 4th Floor, Commerce House 2A, Ganesh Chandra Avenue, Kolkata 700013 Connect me @ : (033) 3028 8955-57; (033) 3002 5630-33; 98310 99551 Visit me @ : (which consists of Sections 149 to 172)